A case against Southwest Airlines reveals the biggest problem with consumer lawsuits in America

Big consumer lawsuits are frequently a big win for lawyers but don’t do much for consumers or anybody else. And a recent lawsuit that objected to the way Southwest Airlines issued its drink coupons reveals just that.

In 2010, Southwest began including drink coupons for passengers who bought a “Business Select” class of ticket. But the coupons didn’t have expiration dates on them, and some passengers saved them for later. When Southwest denied the coupon on other flights, several passengers sued.

Eventually, the two parties reached a settlement worth a little bit more than $US1.65 million. That is, the lawyers were granted $US1.65 million. While two “lead plaintiffs” in the case got $US15,000, every other customer just got a new coupon, according to the Associated Press.

In 2005, Congress passed the Class Action Fairness Act, which was meant in part to crack down on so-called “coupon settlements,” but the Southwest Airline settlement was just upheld by a federal appeals court.

Joseph Siprut, the managing partner of Siprut PC, which represented the plaintiffs in their settlement with Southwest Airlines, told Business Insider that he thinks the $US1.65 million payment to his law firm was warranted in this particular case.

“We spent three years litigating the case,” he wrote in an email. “We fronted all the expenses. We took on all the risk, including specifically the risk of non-payment. We achieved a settlement that the Court characterised as an “exceptional” result. We got back for the Class members the very thing that was taken from them. And we got Southwest to pay for our fees out of their own pocket. No, I do not think we received too much money.”

Still, cases where laywers receive large cash payouts and consumers receive little to nothing have gotten more and more criticism recently.

Last year, federal judge Richard Posner rejected a class acton settlement with Radioshack in a different so-called “coupon settlement” case. He did so on the grounds that the plaintiffs’ lawyers personally wanted a $US1 million fee while customers got just $US830,000 worth of coupons, as Forbes reported.

A recent study from the Institute for Legal Reform released “found that consumers who participate in class actions recover little or nothing as a result of the litigation … in more than half of proposed class actions filed, the class members actually receive nothing.”

In the 148 class action cases analysed by the researchers, not a single one went to trial. About a third were dismissed by the plaintiff, another third dismissed by the court, and the final third of cases were settled. When lawyers negotiated settlements, they tended to secure payment for themselves rather than their clients, according to the study.

“Settlements are the real goal of plaintiffs lawyers,” the Wall Street Journal wrote in a scathing editorial on that study. “Lawyers profit handsomely from these agreements that give them a cut of the winnings off the top, but the odds for regular Joe Plaintiff aren’t good.”

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